How to Report Mutual Fund Sales

 

You can choose from three methods to report the sale of mutual fund shares. Once you choose a method, you must stick with it as long as you own shares of that mutual fund. However, you can use different methods for different mutual funds

These are the three methods:

  • Average basis — This is the average cost of all the shares you bought. To learn more, see the Average Basis Method — Mutual Funds tax tip.
  • First-in, first-out — You assume the shares you sold were the first ones you bought. To learn more, see the First-In, First-Out Method tax tip.
  • Specific share identification — You identify the actual shares you want to sell to minimize your capital gain or maximize your loss.

Also, when figuring the basis of your mutual fund shares, include these:

  • Reinvested dividends
  • Reinvested capital-gain distributions
  • Net undistributed long-term capital gains
  • Previously reported wash sales

To learn more, see Publication 564: Mutual Fund Distributions at www.irs.gov.

 

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